Home prices compared to a year ago

Discussion in 'Property Market Economics' started by paguatao, 14th Jun, 2015.

  1. paguatao

    paguatao Member

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    I know that buying a house requires due diligence, and I wonder if I could use a real-life example of what we're looking at right now.

    We already have one IP and are thinking of buying a 2br unit. It's located in Lynwood which is about 18km from Perth CBD, is close to major shopping centres, bus and in a suburb where older houses with larger blocks are being snapped up.

    The unit is listed from 260k, its got a nice new kitchen, newish bathroom although the block itself is quite old and a bit rundown looking. Another 2 units is also for sale in the block of 18 - 1 is listed also 260k, the other 300k (fully renovated).

    This unit was purchased in Feb 2009 for 202k. Units being sold around 200k in 2010. 2 units sold last year July 2014 and September 2014 ,one for 270 and the other for 278k.

    Would be able to get rent of 280-290 per week. Strata fees $430 pq.

    My question is - how much has the market changed/dropped from 12 months ago? What other things should we consider? How else can we work out market value? What kind of offer would you make on it?
     
  2. MTR

    MTR Bling Bling

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    Many changes, Perth is now a buyers market, last stats if you follow stats I believe 9% fall in property prices. Do your own research this is general, some suburbs may be doing better???

    The big one is 30% more stock on the market, oversupply apartments inner city and rents falling, not a pretty picture.

    Sit back and watch, if you are a buy and hold investor timing is not right at the moment

    Mtr
     
  3. Shahin_Afarin

    Shahin_Afarin Finance Broker

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    This is all of perth or certain markets or certain inventory?

    Are development sites hot or in line with other inventory?
     
  4. thatbum

    thatbum law talking guy

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    A unit in lynwood - really? Why are you thinking that?
     
  5. Ausprop

    Ausprop Member

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    technically it is somewhere between a sellers market and a balanced market. Emotion is running high as the iron ore price is used as a proxy for th emarket. The old measure use to be that 14,000 was a balanced market but that was years ago when the available stock was much lower, it would have to be at least 16-18,000 now for a balanced market. Current listings are at 14,200. I think as listings approach 20,000 we will be in a buyers market.

    Interestingly, as stock levels plunged to 9000 prices didn't react, so presumably the reverse will hold true. On the face of it, when stock levels were hovering around 9000 I would have been expecting double digit cap growth, yet it was like punching a wet paper bag
     
  6. Ausprop

    Ausprop Member

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    it's well located, I can see the merit. And evidently cheap
     
  7. INVSTOR

    INVSTOR O+

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  8. paguatao

    paguatao Member

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    You can't get a 3BR house in Lynwood for under 400k anymore. There's a block of land across the road just about to release new 3BR builds. The area is slowly coming up, with flow-on effects from neighbourhoods like Willetton and Parkwood. Pretty sure crime is still an issue, but maybe with more houses being sold and renoed, this might change in the near future.

    Don't really want to extend ourselves to buying a house - higher mortgage, more interest, higher risk if no tenants. A unit seems like a good little investment option, I would have thought there's always a market for units (lower rent, no maintenance, singles/couples renting).

    Also thought the market has been flat for last 6+ months, and if it's supposedly a buyers market then we could have perhaps gone in with a 5-10% discount.

    Neutral/negative gearing would only look good to us if we can get it at lower than 250k, which is still a 25% increase in value from 202k, over the 6 years since 2009 is 4% growth a year.

    Would have offered just under 240k but REA has already said owners wants pretty close to asking price of 260k, so if that's the case then I will just save my money and not buy.
     
  9. MTR

    MTR Bling Bling

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    It really varies. Some areas I believe still doing OK.

    I think its typical of cycles when the market softens it does become price sensitive, perhaps sellers need to adjust as buyers have choice, more stock on the market.

    I believe/am told development sites are still selling but not making too much sense to me. Perhaps some are still finding good deals?? not sure.

    I have put my Willagee project on hold as mentioned in prior post until I see what eventuates over the next 6 months. I don't believe Perth market will crash perhaps a little dip then sideways??

    MTR:)
     
  10. MTR

    MTR Bling Bling

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    Perth stocks went as low as 7000+ and they did react at 9000, double digit figures in most markets. I think when the market started to turn was when the levels started to move closer to 11000-12000?

    There were so many posts with regards to Perth property market soaring and multiple offers on properties.

    MTR:)
     
    Last edited: 15th Jun, 2015
  11. INVSTOR

    INVSTOR O+

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    You're offer is still reasonable. If you were keen to purchase it's still worth writing up an offer even after the agent has says that. The vendor could change their mind once they have an offer.
     
  12. paguatao

    paguatao Member

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    I guess when people say do due diligence, are there any other factors I should take into account, in terms of market value etc.

    Thanks for all replies so far :)
     
  13. paguatao

    paguatao Member

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    Wow. Just wow. We missed a home open on Sunday so I organized for hubby to have a private viewing last night. REA calls me this morning and asks me what we thought. I said we were still looking at other properties, but maintained that any offer made would be under 250k.

    He then said he had another fellow who also made a verbal offer of 250k, and was supposed to get back to him to see if he would raise it to 255k and then the seller might be persuaded.

    So I asked if the seller had given him any written instructions not to bring offers under a certain price (had to try and interrupt his sales spiel) and the answer was no.

    When I repeated that our offer wouldn't be over 250k, he then said, well, we'll just leave it at that.

    I thought he was quite abrupt, dismissive and just a tad arrogant. Wouldn't want to push for a written offer if he's going to react like that. Maybe wait for a couple more months and see if he changes his tune .....
     
  14. Azazel

    Azazel Member

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    If he already has an offer for $250k, and you said you wouldn't go over $250k, I guess he thinks rather than you offering a starting offer under $250k, he'll try the other guy. A bird in the hand...
    If you think it will still be there in a couple of months, no rush I guess?
     
  15. perthguy

    perthguy Member

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    Assuming the other offer is real ;)
     
  16. Azazel

    Azazel Member

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    You think an agent would cut you short if they didn't? Sounds like he doesn't need to waste his time.
     
  17. perthguy

    perthguy Member

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    I have seen it done. There's always another offer... unless there isn't :p
     
  18. Kent Cliffe

    Kent Cliffe Momentum Wealth

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    I have been looking in Lynwood for clients with an appetite to develop down the track. I have been finding the development sites are still quite hotly contested. One I recently purchased was (this is still subject to Western Australian Planning Commission approval):
    http://www.realestate.com.au/property-house-wa-lynwood-118201635

    In this example the condition of the property was average, so we were the only offer and was altered to a price reduction by the vendor. Consequently, we purchased it for a good price comparable to other sales within the area.

    For your investment, I would advise against a unit in that area. Be conscious of the State Housing as some pockets can be a concern. Also, look to the amount of traffic on the street and stay away from road noise.

    From a rental demographic point of view, I see the location more suited to families with 3+ bedrooms and a small backyard.
     
  19. PerthNoob

    PerthNoob Member

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    Hi Kent, at over 500k can you provide further insight into how the figures might work for such a site development wise?

    Cheers!
     
  20. paguatao

    paguatao Member

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    It has taken me more than 7 years to dip a toe back into the property market, I don't even think our first IP has any CG :eek:

    Bank will only lend us 300k (could prob get more with different lender). I'm quite happy to get into the unit market, noted that the rental demographic would definitely be more suited to 3br for families with kids ...

    Not sure how they cost in equity, we're only on one income 100k but PPOR worth mid-750k (guesswork), with only 15k owing. First IP still owing full loan amount 318k, purchased at 305k. Haven't had much movement in the last few years at all.